Sandy and drought propel U.S. insurance losses

The U.S. accounted for about 90%, or $65 billion, of insurance losses from worldwide catastrophes last year, London insurance broker Aon says.

Cars in a garage float in a mixture of storm water and gasoline in lower Manhattan… (Carolyn Cole, Los Angeles…)

The U.S. share of insurance losses from worldwide catastrophes more than doubled in 2012 as Superstorm Sandy lashed the Northeast and the nation suffered its worst drought since the 1930s.

The U.S. accounted for about 90%, or $65 billion, of $72 billion in global losses, according to the Impact Forecasting unit of Aon, the London insurance broker.

That compares with 40% in 2011, when Japan had higher-than-usual costs because of an earthquake and tsunami.

The location and climate of the U.S. make the country more vulnerable than most developed nations to hurricanes, tornadoes, wildfires and drought. U.S. commercial buildings and homes are more likely to have coverage than property in less wealthy nations facing storm risk, such as Nicaragua and Haiti.

"The United States has typically been the main driver of global loss," said Steve Bowen, senior scientist and meteorologist at Impact Forecasting. Bowen said the U.S. typically accounts for about 64% of global insured losses.

The last time the U.S. incurred more than 90% of losses was in 2005, when the country was pummeled by hurricanes including Katrina, Rita and Wilma, he said.

Sandy cost insurers about $28.2 billion, compared with $78.2 billion for Katrina when adjusted to 2012 dollars, Impact said. Additionally, crop insurance claims climbed to a record, with farmers collecting more than $11.5 billion for damage in 2012, according to a Risk Management Agency report published on the U.S. Department of Agriculture website.

Travelers Cos., the lone insurer in the Dow Jones industrial average, said this week that fourth-quarter profit fell 51% on claims from Sandy.

The KBW Insurance Index of 24 U.S.-listed companies gained 16% in the past 12 months, compared with the 20% rally in the 75-company Bloomberg World Insurance Index.